How local small businesses can compete with chains

Locally owned stores are another matter. Their presence is not guaranteed.

"If everything is turned into a chain, we turn into a cookie-cutter city," said Dave Asher of Buy Nevada First. "We would lose our local flavor, our local character, our local identity and end up looking like every strip mall in California."

Their success strengthens the whole community.

"By and large, local businesses pay a higher wage rate than the big boxes do," said Rod Jorgensen, director of counseling and management consultant at the Nevada Small Business Development Center. "And the profits that the local business owner generates are going to be re-spent in this community multiple times.

"Plus we like when we go into a store we frequent and they know our name."

But because chain stores have advantages due to their size and regional or nationwide presence -- often lower prices and always bigger advertising budgets -- they can easily cause problems for small businesses.

So this week, small-business experts and owners offer advice to help locally owned companies and those wanting to start one.

Stay focused

When someone comes into the Small Business Development Center at the University of Nevada, Reno seeking advice on getting started, Jorgensen said, they're often too optimistic about how easy it's going to be.

"You need to research research research and determine whether (your business idea) makes sense in our local community," Jorgensen said.

"We often have one chance to raise the money and we better make darn sure it's the best opportunity. That's No. 1 -- doing a ton of research -- and you can't shortcut that. And you can't worry someone is going to open and compete with you. Don't get in a hurry just because you're the first one in the market."

For David Lorenz, research means creating a business plan.

With wife Shannon, he owns Michael and Sons Fine Jewelry and Native American Art. He says his main chain competitors are Jared, Rogers Jewelers and Zales, but he also faces competition from online sites, TV shopping channels and big general retailers such as Walmart.

"Have a business plan," Lorenz said. "That's very, very critical in starting any business: know your competition, know the marketplace, know your demographics -- who is going to be your customer. Small businesses are always undercapitalized -- you can't be everything to everybody -- so stay focused."

Although Trujillo sells coffee, he doesn't see Starbucks, Seattle's Best or others as his competition because he has a different vision than "fast-food drinks."

From the beginning people have told him to do things differently than he does them.

"I've had people tell us we're not going to stay in business because we don't carry nonfat milk," he said. (His stores carry only soy milk and whole cow's milk.) "You don't want to carry the same product as everybody else and think you do it better."

Decide what you want to be and stick to your vision.

"You can modify your business plan a little, but your culture is your culture," he said. "We have not veered from our culture."

For Trujillo, that culture is to make coffee whereas other coffee shops might prioritize being a place to chill.

"What is the thing that's most important in a coffee house?" he asked. "The equipment. How much money you spend on chairs should not be most important. Are you about coffee or relaxation? Do you want to be a cyber café? Then make things comfortable. But I want to make great coffee so that's what I spend my money on."

This philosophy has paid off for Trujillo, who started in a one-car garage and now has two coffee house locations and a roastery for preparing his coffee beans, which cut out a middleman, saving him money.

"Why we're so different and why we've been successful is because we do not give into anything," he said.

Creating relationships

One area where independent businesses can have an advantage over chains is in creating relationships with customers.

"With big companies, they don't have the hands-on service so it's important (for small businesses) that every person gets the right treatment," said Stephanie Angold of The Find furniture store, which will celebrate nine years in business this July.

She sees her main chain competitors as Pottery Barn and Restoration Hardware, as well as RC Willey for some things.

"As a small business and with me being the owner, I want to make sure the customer is happy," she said.

Digiprint's David Spillers says that the opportunity for customers to work directly with a store's owner is a big deal.

"A lot of times the service is better because you're dealing with the owner," he said.

As owner of a print shop, Spillers considers FedEx Office (formerly FedEx Kinko's) to be his biggest chain competition.

"Chains are usually state of the art," he said. "They have the best technology and that's hard to compete with when you're independent. We lost a customer one time because we used to print their manuals and ship them. And now they can send them over the internet to Kinko's in Chicago."

But that's where being at a scale that allows you to know individual customers can be a good thing.

"It's all built on relationships," Spillers said. "You get to know the owners and like 'em and you go back because you like 'em. With a national chain, you often don't have that relationship, you're just dealing with employees."

Dave Asher ranks superior customer service as the No. 1 priority for small businesses.

He advises small businesses and promotes them as part of his new endeavor, Buy Nevada First, which supports and advocates on behalf of businesses headquartered in the state.

"You have to answer the phone and return messages when you get them," Asher said. "You have to have a good return policy. The difference with shopping online is a good return policy.

"Then the next thing is to brand yourself as local, family operated, headquartered in Nevada -- whatever one of those works best for your situation."

Location

Another way that small, locally owned businesses can counteract the inherent advantages of national chains is picking an advantageous location.

"It's hard for a single brick-and-mortar store -- they have to be convenient," Asher said.

Jorgensen said, "One thing a small business can do to compete with large chain stores is location -- location close to its audience -- which then diminishes the willingness of those individuals to drive a long distance to pick stuff up."

One example he gave is the locally owned Carter Brothers Ace Hardware store at 1215 S. Virginia St.

"They are uniquely located a long way from the big boxes so they serve a small residential community," Jorgensen said. "If I'm going to do a big remodel project, maybe I'd go to a big box but for day-in and day-out needs, I'm going to go there if I live in that area."

Another location advantage for small businesses can be lower rent costs.

"We're not in a high traffic area so we can keep prices at reasonable rate," said The Find's Angold.

Advertising

As mentioned, chains pool advertising and marketing resources for stores across the country. They can afford prime-time TV ads and full-color newspaper inserts.

"Small businesses have to use guerrilla marketing, social media and word of mouth," Jorgensen said, adding, "There's no doubt social media definitely gave (small businesses) a better way to level the playing field."

Lorenz concurred.

"Excellent Yelp and Google reviews have been very beneficial to our company," he said.

On the other hand, zero advertising can cause problems.

"You have to keep advertising if you're a small retailer," Angold said. "That's the biggest mistake you can make. I'm a firm believer that the reason I'm still in business is name recognition."

Lorenz said, "I don't have the advertising budget (of national competitors). But what we do have to offer is ourselves, our passion."

Local tastes

Small, independent businesses can often adjust easier to local tastes.

"Our main advantage is being able to adapt quickly to trends in our area," Lorenz said. "We don't have to wait on someone at corporate, maybe in the Midwest, to act."

Jorgensen said, "If a local person identifies that the local market is interested in this, then I have a better understanding emotionally of what my community is looking for and I can broaden my array of products in that area much quicker than big boxes can. The owner is often the operator and might be like, 'You know, I've been hearing people are interested in X, Y, Z but we only have a little X, Y, Z so let's branch out."

Trujillo feels the same.

"The big chains are looking for absolute traffic, but we have the opportunity to be creative, to not hold back because we have to follow certain rules," he said.

Jorgensen added, "I hope I'm not cutting down big boxes. We all go. … But obviously I'm a big believer in small business -- it's what continues to make America strong. There is no large company out there that wasn't small at one time."